Shell Trading U.S. Company v. Vinmar International Ltd. (M/T “SOLAR NESRIN”) – SMA No. 4461, 26 June 2023

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On January 28, 2023, SHELL issued a demurrage invoice to VINMAR in the amount of $ 77,079.84, as per the laytime calculations with a due date of 1 March 2021.   VINMAR did not dispute the demurrage charges but argued the invoice should be reduced by balances allegedly owed to VINMAR by a different SHELL entity from an unrelated transaction.  SHELL initiated arbitration to recover the balance of the unpaid demurrage. VINMAR ultimately remitted the unpaid balance but failed to pay arbitration costs, fees or interest. In its Supplemental Statement of Claim, SHELL sought to recover these sums. 

Background

In June 2018, VINMAR and SHELL established the “VINMAR TERMS,” a Master Agreement governing cargo shipments. This facilitated the transportation of 10,000 metric tons of styrene monomer and 1,200 metric tons of optional n-propanol from Texas to India on the M/T SOLAR NESRIN. The agreement was formalized on October 15, 2020, with two Bills of Lading (SEUKSONE02112003 and SEUKSONE06112003) documenting the separate shipments.  Both liftings proceeded smoothly.

In January 2021, SHELL issued invoice number 93187957/A dated January 28, 2021, outlining freight demurrage charges totaling $77,079.84. These charges resulted from a demurrage period surpassing the agreed laytime by 3 days, 18 hours, and 21 minutes. While VINMAR acknowledged the demurrage fees, it aimed to offset the amount by claiming unrelated transaction sums owed by a distinct SHELL entity. Consequently, SHELL initiated arbitration under the SMA Rules for Shortened Arbitration, authorized by the “VINMAR TERMS.” The objective was to recover the full $77,079.84 along with interest, costs, and fees.

During the arbitration, VINMAR made partial payments totaling $55,000 and finally sent the remaining balance of $22,079.84. However, SHELL’s claim included the recuperation of incurred costs, interest, and fees stemming from the arbitration and so the proceedings continued.

Discussion

The Arbitrator confirmed that both parties had agreed on October 15, 2020, to transport specified cargoes as per the VINMAR terms. These terms set demurrage rates at $21,000 per day and laytime rates at $200 per ton per hour for styrene monomer and $100 per ton per hour for n-propanol. VINMAR exceeded the laytime by 3 days, 18 hours, and 21 minutes.

VINMAR did not challenge the laytime calculation or the demurrage amount during the proceedings. SHELL’s January 28, 2021 invoice amounted to $79,056.25 but adjusted to $77,079.84 after a $1,976.41 address commission deduction, with a due date of March 1, 2021.

Subsequent interactions led to an October 13, 2022 message from SHELL’s counsel to VINMAR, indicating arbitration initiation if unpaid demurrage was not settled within ten days. The message clarified that offsetting debts from an unrelated “Shell Chemical L.P.” transaction was legally and contractually invalid.

SHELL formally notified VINMAR of its claim and arbitrator nomination on October 31, 2022. However, VINMAR rejected the arbitration appointment on November 3, 2022, citing debts from a separate contract with a different SHELL entity. Communication on November 28, 2022, reiterated SHELL’s arbitration intent, leading to the arbitrator’s Disclosure Statement and Proposed Schedule on December 9, 2022.

On January 12, 2023, SHELL submitted its Initial Statement of Claim. During arbitration, VINMAR partially paid, reducing the unpaid demurrage to $22,079.84. SHELL issued a second invoice dated January 11, 2023, reflecting this payment. Despite opportunities, VINMAR failed to respond within the given timeframes.

SHELL reiterated its intent to recover costs, fees, and interest on May 16, 2023. A June 8, 2023 Supplemental Statement of Claim sought $6,318.01 in interest from January 28, 2021, and $4,000 in attorney’s fees and arbitration costs. VINMAR remained unresponsive despite extra time.

Decision

The arbitrator awarded SHELL $6,098.39 in interest, calculated from March 1, 2021, based on the demurrage invoice. An additional sum of $4,000 in attorney fees was also awarded. The Arbitrator’s fee of $2,500 was considered a joint obligation of both parties, with SHELL initially paying and subsequently recovering from VINMAR.